Investment in Build to Rent sector reaches a record high

News & Press July 2 2019, Tristan

Investment into the Build to Rent (BTR) sector in the UK reached a record high in 2018 with almost £4 billion of new funds allocated to a new analysis.

The research by Bidwells found almost two fifths of these transactions were forward funded as investors seek scale in key investment locations and the firm has indicated that the total funds committed over the past two years will reach up to £6 billion.

With the focus of investment in the year in the London market, accounting up to £1.6 billion of total funds committed, the South East and Eastern regions have revealed a further £417 million had been invested in the area.

When it comes to the residential market, the annual house price growth rose marginally in April to 0.9% from 0.7% in March, driven by the largest monthly increase in values since November 2018.

However, price growth remains weak despite a continued shortage of stock as both buyers and sellers choose to sit out the current political and economic uncertainty. This said, first time buyer activity continues to rise, assisted by Help to Buy, low mortgage rates and improved affordability.

Across the Oxbridge Growth Corridor, the report says that capital values for apartments in city centre locations generally remained stable in 2018. Highly accessible locations with quality city centre environments continue to record premiums. Recent evidence in the analysis underlines the positive impact of an improved town centre offer and the delivery of quality residential stock.

In all locations, values slip back sharply away from the city core, although this discount is particularly marked in Oxford and Cambridge. In the latter city, capital values are around £550 per square foot in the city fringe offering greater BTR opportunities for investors.

With the recently announced introduction of the East West Rail Route, it says that this presents long term opportunities in the Growth Corridor, providing locations along the route easy access to Cambridge, helping to address business concerns concerning the availability and affordability of housing.

Bedford, for example, will be within a half hour commute of the science and tech hub of Cambridge. However, new home capital values in the town currently stand less than half that those of the central Cambridge, while rents are amongst the most affordable across the Growth Corridor region at just 24% of average net incomes.

As always with new infrastructure, the investment impact takes time, but the commercial opportunity across the Growth Corridor region will quickly focus minds on future opportunity locations, it adds.

‘Given accelerating demand for globally mobile talent by knowledge based industries across the Oxbridge Growth Arc, we have seen growing investor demand across the region. Higher yield locations such as Bedford, with good access to the region’s universities and science parks, offer opportunities to investors, particularly given forthcoming transport infrastructure improvements,’ said Colin Summers, capital markets partner at Bidwells.